1 | Page
FSA Level 1 Exam Study Guide Questions
and Correct Answers
Why are investors demanding quality sustainability information?
Ans: — Investors source quality sustainability info to meet their
investment goals.
What factors drive demand for quality sustainability information
within companies? Ans: — Sustainability data, both qualitative and
quantitate can contribute to company success in the near, medium
and long term by improving the management of sustainability-
related risks and opportunities.
Besides companies and their investors, what other institutions
influence demand for sustainability information? Ans: — The
performance benefits that investors and companies experience
when integrating sustainability information into their decision-
making process are not the only factors driving demand for it.
Other organizations, both public and private influence global ESG
dialogue
Why was disclosure the basis of regulatory reform in the wake of
the 1930's stock market crash? Ans: — The stock market crash of
1929 sent shocking waves throughout global markets, leading to
global economic declines and the Great Depression. Lack of
transparency in capital markets can have disastrous consequences.
Disclosure was the basis of regulatory reform in this defining
period because disclosure is a means to promote transparency.
What is the relevance of "materiality" in the context of disclosure,
and how has the concept historically been interpreted? Ans: — The
concept of "materiality" focuses on information that impacts
financial performance and investor decision-making. It dictates
what companies are and are not obligated to disclose.
How has the purpose of accounting changed since the 1930s, and
why did financial reporting move toward standardization? Ans: —
Early years centered around accurate record keeping using
historical cost accounting. Firms began reporting info using a wide
range of methods reducing comparability. Adoption of IFRS and US
© 2025 All rights reserved
, 2 | Page
GAAP allows investors around the world to efficiently use info
through standardized means.
What does the rise of intangible assets mean for corporate
disclosure? Ans: — The increasing proportion of intangible assets
as a percentage of S&P market value highlights that a significant
amount of information regarding corporate performance and value
drivers are not captured in financial statements.
What factors contribute to increasing investor interest in non-
financial information? Ans: — The value of non-financial
disclosure was endorsed by the financial reporting community.
Furthermore, they are an imperative component of business
reports to evaluate a company's long term value.
What challenges exist in sustainability disclosure that do not
necessarily exist in financial disclosure? Ans: — Relative to
financial disclosure and accounting, sustainability disclosure is a
young discipline. With many different parties interested,
companies must balance varying needs of information,. Challenges
with ESG data, high variability in scale and scope of ESG data can
limit comparability.
What does "climate first" disclosure guidance tell us about
regulators' approach to sustainability disclosure globally? Ans: —
Regulators and others that issue new disclosure guidance often
focus on climate information rather than comprehensive ESG
disclosure.
What are the four main characteristics of sustainability disclosure
guidance? Ans: — Interpretive guidance (most flex) - clarifies how
sustainability disclosure applies to existing guidance
Principles-based guidance - provides a list of tenets to guide
reporting
Comply-or-explain guidance - new mandatory disclosure guidance
(implied in name)
Line-item disclosure (least flex)- uses specific line items
What two considerations must sustainability disclosure guidance
balance and how do disclosure standards help achieve that
© 2025 All rights reserved
FSA Level 1 Exam Study Guide Questions
and Correct Answers
Why are investors demanding quality sustainability information?
Ans: — Investors source quality sustainability info to meet their
investment goals.
What factors drive demand for quality sustainability information
within companies? Ans: — Sustainability data, both qualitative and
quantitate can contribute to company success in the near, medium
and long term by improving the management of sustainability-
related risks and opportunities.
Besides companies and their investors, what other institutions
influence demand for sustainability information? Ans: — The
performance benefits that investors and companies experience
when integrating sustainability information into their decision-
making process are not the only factors driving demand for it.
Other organizations, both public and private influence global ESG
dialogue
Why was disclosure the basis of regulatory reform in the wake of
the 1930's stock market crash? Ans: — The stock market crash of
1929 sent shocking waves throughout global markets, leading to
global economic declines and the Great Depression. Lack of
transparency in capital markets can have disastrous consequences.
Disclosure was the basis of regulatory reform in this defining
period because disclosure is a means to promote transparency.
What is the relevance of "materiality" in the context of disclosure,
and how has the concept historically been interpreted? Ans: — The
concept of "materiality" focuses on information that impacts
financial performance and investor decision-making. It dictates
what companies are and are not obligated to disclose.
How has the purpose of accounting changed since the 1930s, and
why did financial reporting move toward standardization? Ans: —
Early years centered around accurate record keeping using
historical cost accounting. Firms began reporting info using a wide
range of methods reducing comparability. Adoption of IFRS and US
© 2025 All rights reserved
, 2 | Page
GAAP allows investors around the world to efficiently use info
through standardized means.
What does the rise of intangible assets mean for corporate
disclosure? Ans: — The increasing proportion of intangible assets
as a percentage of S&P market value highlights that a significant
amount of information regarding corporate performance and value
drivers are not captured in financial statements.
What factors contribute to increasing investor interest in non-
financial information? Ans: — The value of non-financial
disclosure was endorsed by the financial reporting community.
Furthermore, they are an imperative component of business
reports to evaluate a company's long term value.
What challenges exist in sustainability disclosure that do not
necessarily exist in financial disclosure? Ans: — Relative to
financial disclosure and accounting, sustainability disclosure is a
young discipline. With many different parties interested,
companies must balance varying needs of information,. Challenges
with ESG data, high variability in scale and scope of ESG data can
limit comparability.
What does "climate first" disclosure guidance tell us about
regulators' approach to sustainability disclosure globally? Ans: —
Regulators and others that issue new disclosure guidance often
focus on climate information rather than comprehensive ESG
disclosure.
What are the four main characteristics of sustainability disclosure
guidance? Ans: — Interpretive guidance (most flex) - clarifies how
sustainability disclosure applies to existing guidance
Principles-based guidance - provides a list of tenets to guide
reporting
Comply-or-explain guidance - new mandatory disclosure guidance
(implied in name)
Line-item disclosure (least flex)- uses specific line items
What two considerations must sustainability disclosure guidance
balance and how do disclosure standards help achieve that
© 2025 All rights reserved
